NAVIGATE THE CATEGORY MANAGEMENT JARGON

Updated: May 29

Category management can become quickly complex, all the more that different companies or organisation use different words to designate similar components. We asked our Retail Experts to share what are the secrets behind all these technical terms

1. DEFINITIONS

a) RANGE

A Group of Products that addresses a consistent and homogeneous customer need. A range is made of Products (also called items or article), with a selling price used by customers to answer a consumption need. Then each product can have several variant (in size, color, flavor). Each variant has a barcode and is called a SKU (Stock Keeping Unit).

For the Retailer, the Range needs to ensure that it maximises Customers’ Choices and avoid duplicate items. If customers are unwilling to switch from one product type to another, the retailer needs to ensure that it provides customers with a complete set of products type (width) before it provides customers with many options in that product type (Depth).

The range focuses on Assortment, Display, Pricing

b) CATEGORY

A category is the same as Range and includes its activation: Promotions. Nowadays, promotion is often enlarged to CRM although CRM is often managed by Marketing)

c) RANGE WIDTH

The width defines the number of products a range comprise. The more the product, the wider the customer needs can be answered. For example, a T=Shirt can be long sleeve, short sleeve, round collar, v-collar, double stitched sleeves.

The Range Width’s usually represent the product’s attribute that Customers are not willing to switch. For example, they don’t want to switch between Jasmine Rice and Glutinous Rice.

d) RANGE DEPTH

The depth defines the number of variant available for one product. For example, a T-Shirt can be yellow, blue, red, white, …

The Range Depth generally represents product attribute on which customers can switch easily. For example, pack size: if there is no 1 KG Jasmine Rice, they can buy a 0.5 KG Jasmine Rice

e) RANGE BREADTH

The Range breadth defines the extent of the Width (up to what products types segmentation do we go) and the extent of the Depth (up to how many options do we propose).

The smaller the store format, the more important is the Range Breadth as space is limited, as are Shopper’s baskets.

f) CUSTOMER DECISION TREE

Often called CDT (short for Customer Decision Tree), the Customer Decision Tree is the visual translation, in products groups and segments, of the successive logical questions a shopper is asking herself when buying a product in a category.

For the retailer, the CDT helps define the category and segments as well as the product grouping and their adjacencies.

For the Customers, the CDT helps them to easily read the shelves, measure the choice offered and easily find the products they want.

g) ASSORTMENT DISTRIBUTION

The assortment distribution defines in which store an item is distributed. Though it might seem easy, the optimization of the distribution very often represent the low hanging fruits of sales growth. Because of the complexity of Range Structures, Store Format and Store Clustering, retailers’ Teams are often lost in mapping the distribution.

The priority, for both retailers and suppliers, is to ensure that items which are both among the Top 20% national sales and with less than 100% distribution be immediately distributed in all stores.

h) ASSORTMENT EFFECTIVENESS

In a range, each item represent a percentage of the total sales. If we calculate the sales contribution of each item, sort them from the largest contribution to the smallest, and add up the sales contribution to the previous one, we have a Paretto visualization of the Assortment Effectiveness. We then realise that just a few items make up for most of the sales (the famous 80/20 rule).

The less there are items with minimal sales contribution, the more the Assortment is effective. Because its space is limited, the retailer will always be looking for low performing items (i.e. with very low sales contribution) to delete. If suppliers know some of its item are in this case, they should either review their retail Mix or be ready for de-listing.

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